Microsoft To Give A Cut Of Every Zune Sold To The Recording Industry -- Though It's Not Clear Why

from the how-things-evolve dept

While some folks (especially those at the EFF) have been pushing for some sort of compulsory licensing model for music, and others have pushed for a Canada-style plan of taxing blank media to give to the entertainment industry. However, it looks like Microsoft and Universal Music decided to cut out the government middleman and have come to an agreement to give Universal Music a cut of every Zune device sold. It's just like the tax on blank media, but without the government in the middle. The Zune, of course, is Microsoft's new attempt at an "iPod killer," though there are questions about how successful it will really be. It's not clear how much Universal Music gets, but it's more than $1 per device, and they promise to give half of all money received to musicians -- though, they don't say how they'll determine who gets what. The company will still get a piece of every piece of music sold for the Zune as well. While the deal is just with Universal Music, Microsoft has said they'll offer the same terms to "the rest of the industry" as well. While the NY Times piece talks about how "rare" this move is, it's really not all that different than the deal that Universal Music and others struck with YouTube a few weeks ago (other than the fact that that deal was all equity, none of which needs to be shared with artists).

Either way, this raises the question of whether or not this is the "new" business model for the entertainment industry, where they somehow come to agreements with consumer electronics/technology/service providers to simply get a cut of revenue. It's an interesting model that actually does play into the idea that the content helps to promote the sale of the devices, but it also raises a lot of questions. While Microsoft has said that others are free to join in on the same terms as well, that's obviously limited to the major players. What about the indie labels? Microsoft isn't going to want to cut deals with all of them, nor should they. What about those musicians who just release music to the world directly? Should Microsoft offer them deals as well? It makes for a difficult situation that is based on the state of the content world today -- not where it will be in the future. It's also not at all clear why Microsoft did this, other than it may have been the only way to get Universal Music to offer songs in the download store. With Google/YouTube, the deal was obviously to get away from the lawsuit risk -- but Microsoft isn't going to get sued for selling a handheld entertainment device (especially with all of the DRM it includes). About the only reason Microsoft would do this was because the recording industry just wasn't getting behind Zune and Microsoft was starting to get desperate.

Its obvious why this happened. The RIAA has been asking Apple to do this for awhile now. MS comes along and offers the RIAA what they have been asking for, a music device, and a music service. Next will come an exclusive contract to distribute their music through MS as soon as their iTunes contracts run out. No music on iTunes, people go and buy Zunes, and MS wins despite coming out with an inferior product. It must be nice to be able to buy markets that scare you instead of competing. Calling DOJ.....

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i dont think the major labels would ever drop itunes for something as horribly disigned as the Zune. Wi-fi slow as death, screnn larger but same pixel count... BROWN as a color? seriously, itunes is making the labels millions.

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That is until some one figures out how to hack/mod the Zune software or create an interface that fools the system into thinking an iPod is a Zune. It won't take long for some one to come up with a way around it. I am sure there is some one working on a way to automagically side step iTunes copyright issues for other music players.

I like comment #2...

I was thinking the same thing. This sounds like an attempt to win the favor of the industry labels. MS has to realize that people don't want DRM but they also know that "if they do it right, they won't care and will buy it anyway".

I'm researching mp3 players (I intend to buy on this holiday season in hopes of a good deal) and Zune is not even my radar. I don't feel like having to wonder if (insert mp3 file) will play or not on it. Creative is looking better and better.

Re: I like comment #2...

For what it's worth, I have a Creative Zen and have had no problems playing any of my mp3s. Granted, the software that comes with it sucks ass and won't work with any MS OS older than Win XP (don't know about *nix or Macs, but I kind of doubt it) and all of my files are DRM free (I ripped most of my CD's using ITunes).

Re: Re: I like comment #2...

There is an open source interface for the creative line of mp3 players. It's called gnomad2. I did have it working on fedora core 3 but it's broken now I upgraded to FC5. Other people have got it working on FC5 though.

The interface is slightly worse than the Win XP one, though. Still, it does the basi job of managing songs, albums and playlists through a clunky but usable interface.

Musician who's been awake for a while...

It isn't the artists who have to wake up to the continued systematic theft of product:

We need people who will stand up to organizations such as BMI and ASCAP who freely admit they do not forward royalties to the artists based on true spin count. Not only that, they demand sometimes double and triple payment from those who want to broadcast the music, (e.g. such as the % paid at the point of purchase for the CD and the % paid at the point of broadcast when a bar or restaurant has a jukebox)

We need people who will stand up to corporate radio, such as Elliot Spitzer, and end the payola practices still continuing in the industry in the form of iPod's, walkmans and vacations.

We need people who will stand up against Microsoft and the major record labels and tell them it is completely unacceptable to lock out the independent musician from making sound business decisions on not just how their music will be released and marketed, but where they are not permitted to create income points in this "business model" such as this most recent inbreeding move.

I'd be curious to see if any of you have any ideas on how to leverage technology towards the benefit of the individual artists.

Should this post come across a little fuzzy, I may be a wide awake musician, but I'm wide awake with a round of the flu and silence sucks even with a stuffed up nose! ;>)

Re: Musician who's been awake for a while...

Technology is already leveraged towards the individual artists. Any artist nowadays can post a MP3 online, and anybody accessing their site can get the song, upload it to devices, etc, etc.

I think the one thing that may be dooming a lot of lesser-known artists is their infatuation with the micropayment system for selling their songs. If nobody has any idea who you are as an artist, you're completely foolish to try and sell off your songs for 99 cents or whatever. Give the song away for free! You remove all barriers from the person downloading your music.

Once it's on their computer, you can get scrobbled, and develop presence on Last FM, and you also potentially can get on their iPod or other MP3-storing device.

If iPod owners are aggravated enough with Universal Music Group, and purchase less UMG albums to fill their iPods with, then obviously they're going to need to fill that space with something else. To me, as a hobbyist musician, that's opportunity.

Most Music Sucks

Most commercially available music since the invention of the vinyl record has basically sucked. The record companies are "only in it for the money". I am thankful that I grew up in the Zappa years, and came to love true musicians and their music. I still cannot get over the crap today. With all the technology and quality musical instruments available, you would think there would be more "music" out there. Instead the majority of it it sampled, remixed, layered tracks and processed vocals. No wonder all the buzz in the "popular" music industry is about money, money, money. Most true musicians and listeners could care less about the money woes of the "poor" music stars of today or any other year for that matter. Like many artists now and in the past, pure musical devotion provides all the satisfaction one needs and the financial success just happens as a side benefit.
Frank never had popularity or air play, but succeeded where many fail, because he gave his fans what they wanted, and maintained a following. He did not treat them as disposable, like many artists today. Save the recycling for garbage.

RIAA?

Wouldn't the RIAA want payments to all labels, not just one conglomerate? That's what the RIAA looked for with the tax on recording devices, and the (short-lived) FM radio deal. Instead, we have this lopsided deal that benefits only Universal Music Group and taxes -- with no connection to actual music consumption -- electronics. It's a one-company tax, period. And then Universal and Microsoft have the audacity to pass that off as "supporting artists." Ain't no way.

Netflix supports the use of my couch and the consumption of tasty treats. Bloomingdale's and Frito-Lay don't have to pay Netflix for that privilege. Come on.

There's a really easy model for paying labels and artists for music sales: paying them for music sales.

This is about Apple

The actual reason they would do this is because at this point the iPod money is where it is at for Apple. They make more there than they do on computers which is why they have guarded against this deal even though the labels had wanted for a long time.

If the Zune takes off then when it comes time to negotiate with Apple again labels will demand this from them as well which hurts apple way more than it does MS.

Absolute Disgust!

I can barely contain my disgust at this news. This is so obviously the "thin edge of the wedge" intended strictly to set a precedent and ultimately harm Apple's relationship with the labels. Apple's model pays good talent for good music. Microsoft's model just writes the cheques whether the artists deserve it or not. (I think if the labels need so much extra money to pay the electric bills they should give just the musicans less and keep more for themselves. After all, it's the labels that really make the music, musicians are a dime a dozen, right?) BTW, the Canadian "iPod Tax" was in effect for maybe two years then was cancelled for being silly, and all the money was refunded.